Product distribution (or place) is one of the four elements of the marketing mix. Distribution is the process of making a product or service available for use or consumption by a consumer or business user, using direct means, or using indirect means with intermediaries.
The other three parts of the marketing mix are product, pricing, and promotion.
Channels and intermediaries
Distribution of products takes place by means of channels. Channels are sets of interdependent organizations (called intermediaries) involved in making the product available for consumption to end-user. Merchants are intermediaries that buy and resell products. Agents and brokers are intermediaries that act on behalf of the producer but do not take title to the products.
Channel design
A firm can design any number of channels they require . Channels are classified by the number of intermediaries between producer and consumer. A level zero channel has no intermediaries. This is typical of direct marketing. A level one channel has a single intermediary. This flow is typically from manufacturer to retailer to consumer.
Channel mix
In practice, many organizations use a mix of different channels; in particular, they may complement a direct sales-force who typically call on larger customers with agents who cover the smaller customers and prospects. In addition, online retailing or e-commerce is leading to disintermediation. Retailing via smartphone or m-commerce is also a growing area.
Managing channels
The firm's marketing department needs to design the most suitable channels for the firm's products, then select appropriate channel members or intermediaries. The firm needs to train staff of intermediaries and motivate the intermediary to sell the firm's products. The firm should monitor the channel's performance over time and modify the channel to enhance performance.
Channel motivation
To motivate intermediaries the firm can use positive actions, such as offering higher margins to the intermediary, special deals, premiums and allowances for advertising or display. On the other hand, negative actions may be necessary, such as threatening to cut back on margin, or hold back delivery of product.
Channel conflict
Channel conflict can arise when one intermediary's actions prevent another intermediary from achieving their objectives. Vertical channel conflict occurs between the levels within a channel and horizontal channel conflict occurs between intermediaries at the same level within a channel.
